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Apple unveiled a small new iPhone, a new iPad tablet for business use and price cuts for its Apple Watch at a product event Monday. The announcements, which were largely expected, aim to keep up the company's commercial momentum in the face of mounting challenges.

The company could use a lift. Sales of its flagship iPhone are levelling off after surging last year to record levels that made Apple the world's biggest company by stock market value. Many are wondering if Cook can come up with another big hit.

And on Tuesday, Apple lawyers will square off with authorities in federal court over the FBI's demand for help unlocking a San Bernardino killer's encrypted iPhone. The tech giant insists the government's plan would compromise security for all iPhone users.

While Apple's dispute with the government has commanded headlines for weeks, it warranted only a brief mention at the product event. "We did not expect to be in this position," CEO Tim Cook told the gathering. "But we believe we have a responsibility to protect your data and to protect your privacy."

The iPhone SE will rely on the same processor and have many other features in the larger 4.7-inch iPhone 6S, which came out six months ago. (Stephen Lam/Reuters)

The iPhone SE will also be equipped with a longer-lasting battery than the iPhone 5S and have faster wireless connections. It will also work with Apple Pay, the company's digital wallet.

The iPhone SE will be available for pre-order in Canada starting at $579 (not $549 as Apple originally reported) from March 24. It will ship starting March 31.

Apple has enjoyed record iPhone sales since the company introduced models with bigger screens in late 2014. But analysts say it's becoming harder for Apple and other smartphone manufacturers to come up with dramatic improvements to differentiate their products.

UBS analyst Steven Milunovich estimates Apple has sold more than 265 million newer iPhones with larger screens — at 4.7 inches or 5.5 inches. But almost as many iPhone owners were still using older models with smaller, 4-inch screens.

Apple says it sold more than 30 million 4-inch iPhones just last year, even though the last model came out in 2013.

Analysts say those customers could be candidates to buy the new iPhone SE, either because of its lower price or because they find it easier to hold a smaller phone.

Smaller iPad Pro

Apple is also refreshing its slumping line of iPad products by slimming down its larger "Pro" model.

The new 9.7-inch iPad Pro announced Monday is a successor to the iPad Air 2 from 2014. It's also alternative to the 12.7-inch iPad Pro that Apple introduced last year as part of its attempt to gain more corporate customers.

Phil Schiller, senior VP of worldwide marketing for Apple, introduces the iPad Pro with 9.7-inch display during an event at the Apple headquarters in Cupertino, California March 21, 2016. (Stephen Lam/Reuters)

Apple is hoping the iPad Pro — with a more powerful processor and camera — will give more consumers an incentive to buy a new tablet. It is hitting the market as Apple's iPad sales have been falling for several years.

The new, smaller Pro tablet starts at $799 with 32 gigabytes of storage, a $250 savings from the larger Pro model. The price for an iPad Air 2 with 16 gigabytes of storage is being cut to $499 from $549 in another attempt to spur sales.

Apple will begin accepting orders for the smaller iPad Pro Thursday. The device will start shipping a week later, on March 31.

Both sizes of the iPad Pro compete with several Windows 10 tablets, including Samsung's Galaxy TabPro S, which started selling last Friday in the U.S. for $900 US.

Cheaper Apple Watch

Apple is also cutting the price of its smartwatch and introducing an array of new bands in an attempt to spur more sales of a gadget that hasn't won a big following yet.

Prices for the Apple Watch will start at $399 in Canada, down from $449, Apple is also releasing a new type of wristband made of woven nylon, along with more colours for existing types of bands.

Prices for the Apple Watch will start at $399 in Canada, down from $449, Apple announced Monday. (Koji Sasahara/Associated Press)

The expanded variety is designed to appeal to the roughly one-third of Apple watch owners who like to switch bands.

The highly anticipated Apple Watch was released a year ago, but sales haven't met some of analysts' more bullish predictions. While Apple hasn't released figures, IDC's analysts estimate the tech giant shipped 11.6 million watches last year.

Apple CEO Tim Cook opened a product event in California on Monday by saying that Apple owes it to its customers to protect their privacy and the personal information they store on iPhones. (Stephan Lam/Reuters)

Apple CEO Tim Cook opened the event in California on Monday by saying that Apple owes it to its customers to protect their privacy and the personal information they store on iPhones. He says he is "humbled and deeply gratified" by the outpouring of support he has received.

He has vowed to fight a federal magistrate's order requiring Apple to create special software that would override the iPhone's security features and allow the FBI to hack into the device used by the San Bernardino killer in a suspected case of terrorism.

Apple says that doing so could leave all iPhones vulnerable to future hacking attempts, although federal prosecutors contend they're only asking Apple to write code that would work with one phone to protect national security.

Federal magistrate Sheri Pym, who issued the order, will hear arguments from both sides in a Riverside, California, courtroom on Tuesday.

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